When I graduated from college in 2010, I walked away owing nothing. In fact, I was paid to go to college, courtesy of the United States Air Force. I chose this path because growing up it was emphasized that debt could cripple you, so stay out of it unless you’re buying a house. Where was the financial literacy?
While I haven’t always followed my parent’s advice, in this case, I did, and it helped me avoid student loan debt. But, I am amongst the minority. Sixty-two percent of seniors who graduated in 2019 from a public or private nonprofit college had student loan debt. What’s more, the average amount owed was $28,940, according to the Institute for College Access and Success. Where was the financial literacy?
Luckily, Colorado lawmakers are looking for ways to help students better understand debt, credit, student loans and a host of other financial issues. To that end, they introduced and passed House Bill 21-1200. Here’s how it’ll help.
The Problem
According to the Colorado Legislature, more than 743,000 Coloradans have student loan debt with an average debt burden of more than $38,000. That’s a fair amount higher than the national average. Further, in the US, consumers owe $893 billion in credit card debt, and approximately 41 percent of households carry revolving debt, which means the debt isn’t paid off each month.
More concerning is the fact that almost half of US families have zero retirement assets. Even middle-class families with incomes higher than the national average only have, on average, $5,000 in retirement accounts.
To help combat these statistics, Colorado lawmakers passed HB 1200, a bipartisan bill aimed at teaching 9th to 12th graders everything they need to know about personal finances.
The Solution
Under current Colorado law, school districts don’t have to adopt personal financial literacy (PFL) curriculum, but it is strongly encouraged. HB 1200 doesn’t change this, but it requires the state board of education to periodically review financial literacy standards for 9th through 12th grade. It also gives the schools that adopt PFL curriculum additional resources through the Personal Financial Literacy Resource Bank, an online site with free instruction resources for teaching K-12 PFL, which is maintained by the Colorado Department of Education.
Specifically, HB 1200 will add high school level learning courses addressing:
- How to budget and pay for higher education —
- Including how to obtain a scholarship, grant or student loan.
- The costs associated with in-state and out-of-state tuition.
- Room, board and other possible costs associated with a postsecondary degree or credential.
- Potential career earnings for different degrees and credentials, including starting salary.
- The purpose of, and how to access, the free application for federal student aid (FAFSA) and the Colorado application for state financial aid (CASFA).
- The ins and outs of credit cards and credit card debt.
- What you need to know before purchasing a home, including home loans and managing mortgage debt.
- The purpose of saving for retirement, investments and retirement benefits.
Moreover, while school districts aren’t required to offer PFL, they must help 9th to 12th-grade students establish an individual career and academic plan. HB 1200 adds to this by making it a requirement that schools inform the student and the student’s parents about the importance of the FAFSA and CASFA and offer help completing these forms.
This is especially important because the Colorado legislator reports that high school seniors who complete the FAFSA are 84 percent more likely to pursue higher education. And, according to Go Banking Rates, people with a bachelor’s degree make an average of $32,000 more per year. That adds up to approximately $1 million more throughout a person’s lifetime.
The Importance of Financial Literacy
Going into debt is almost always easier than paying it off. Further, if you take on too much debt and can’t make the minimum payments, you’ll damage your credit rating. This could prevent you from buying a house or car and cause you to have higher interest rates whenever you take out a loan. Finally, if you don’t prepare for retirement, you might find yourself forced to work during your golden years.
To help avoid these financial pitfalls, Colorado lawmakers are looking for ways to help students develop financial literacy. This includes encouraging schools to adopt PFL curriculum and giving schools financial literacy resources.
Pointedly, thanks to the passage of HB 21-1200, high school students who take these courses should be better prepared for financial independence as they enter their adult lives and start to make choices regarding higher education and life decisions.
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